1. Fundamentals of Capital Market

3. What is a share / stock? A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earning There are two main types of stock: –common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares.

4. What is a stock exchange? A specialised marketplace that facilitates the exchange of securities that already exists A stock exchange constitutes any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities According to HASTINGS Stock Exchanges or security market comprises all the places where buyers and sellers of stocks and bonds or their representatives undertake transactions involving the sale of securities

5. What is full form of SENSEX? The Sensex is a "securities index". What is an index? An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE.

6. Who used the word SENSEX? Mr. Deepak Mohani CEO of Trendwatchindia An IIT and IIM pass-out 1989

7. What is share / stock trading? Trading is buying and selling of shares or securities What is normal trading? A normal trading is nothing but trading in permitted lots (bunch) What is odd lot trading? Odd lot is a securities trade in which fewer trading units exchange hands when compared to the "normal" amount for that particular security. In stock trading, an odd lot is an order for anything less than 100 shares (which is called a "round lot"). However, thinly traded stocks sometimes trade in 10-share increments. This concept is not invogue in our country at present

8. Short selling. The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller Long position The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.

9. Mechanics of Trading Trading on stock exchanges takes place either on the basis of the Auction system or Trading floor or Hybrid Trading Floor Trading The floor where trading activities are conducted Trading floors are found in the buildings of various exchanges This may be a Open outcry or Online Trading system BSE has moved from Outcry to BOLT in the year 1995

10. Membership The trading platform of the exchange is accessible to the investors only through the members The members are admitted or terminated as per the SCRA(1956) Corporate Structure Paidup capital – Rs. 30 lakh Net Worth – Rs. 200 lakh Interest free security deposit Rs.150 lakh Collateral Security Deposit Rs. 25 lakh Annual Subscription Rs.1 lakh Capital Adequacy Track Record Education Experience

11. Benefits Access to the market Wide trading facilities – Equities, Debt, Derivatives State of the art technology Standards of trading Demutualised Exchanges

12. Depository National Securities Depository Limited (NSDL) Central Depository Services Limited (CDSL) Depository Participant Depository Participants Pool account Settlement Account of Clearing Agency

13. What is an IPO? What is FPO? What is a Rights Issue? What is a Bonus Issue? What is a Mutual Fund? What is FDI? What is FII? What is Market Capitalisation? What is Dalal Street?

14. Auction trading In the Auction Market “Auctions” are initiated by the Exchange on behalf of trading members This is an order driven trading system where customers “ buy and sell” orders are matched at a central point This system allows the buyer and the seller to find a mutually agreeable price with no intervention of broker dealers In India except BSE all other exchanges are auction based

15. Hybrid Trading Hybrid trading system is an auction type of trading with bids and offers being made by open outcry and at the same time it is quote driven system too

16. Transaction Cycle A Seller / Buyer A Broker Through an exchange Order to Trade Settlement Schedule Funds Settlement

17. National Exchange for Automate Trading (NEAT) NSE introduced for the first time in India, fully automated screen based trading. It uses a modern, fully computerised trading system designed to offer investors across the length and breadth of the country a safe and easy way to invest The NSE trading system called 'National Exchange for Automated Trading' (NEAT) is a fully automated screen based trading system, which adopts the principle of an order driven market VSAT = Very Small Aperture Terminal

19. BSE’s On Line Trading System (BOLT) To facilitate smooth transaction, BSE had replaced its open outcry system with BSE On-line Trading (BOLT) facility in 1995 This totally automated screen based trading in securities was put into practice nation-wide within a record time of just 50 days The BOLT platform capacity has been enhanced to 40 lakh orders per day by upgrading the hardware. BOLT has been certified by DNV for conforming to BS7799 security standards. With this, BSE is the second stock exchange in the world to have this certification Exchange has also introduced the world's first centralized exchange based Internet trading system, BSEWEBx.com. The initiative enables investors anywhere in the world to trade on the BSE platform

21. Rest tomorrow

22. Indian Economy and Capital Market at a glance Second fastest growing economies after China with an average annual growth rate of more than 8 per cent in the last three years India’s growth rate has surpassed some of the developed economies GDP at current market prices is over US $890 billion

23. Indian Economy and Capital Market at a glance Foreign investment can be made in India with specific prior approval in sectors other than those prohibited Foreign investment is now freely allowed in all sectors, including the services sector subject to specified sect oral ceilings except in a few strategically sensitive areas

24. Indian Economy and Capital Market at a glance General permission granted to the Indian companies for issuing rights/bonus shares to the existing nonresident shareholders subject to adherence to sect oral cap Indian companies may issue shares under Employee Stock Option Scheme to its employees who are resident outside

25. Indian Economy and Capital Market at a glance An Indian company can raise foreign currency resources overseas through ADRs or GDRs Foreign Institutional Investors are allowed to invest in India under the Foreign Institutional Investment scheme Portfolio investment limits in individual companies can be raised by Board resolution keeping the overall sect oral cap in view

26. Indian Economy and Capital Market at a glance Investments can be made through foreign venture capital funds Private equity is allowed as an alternative form of investment Qualified Institutional investors are allowed to invest in Indian Depository Receipts floated by foreign companies. FIIs and NRIs can also invest in IDRs after obtaining permission from RBI

27. Indian Economy and Capital Market at a glance FIIs can make investments in Corporate and Government Bond markets within the limits Household Investment in Shares and debentures as percentage of financial savings at 4.9 per cent

28. Indian Economy and capital market at a glance Market capitalization of Rs.34,62,692 crore or over US $ 770 billion India is the world’s 12 th largest in market capitalization. Market cap-GDP ratio is almost 100 per cent

29. Indian Economy and Capital Market at a Glance With Sensex crossing 20000 mark – ahead of most of the emerging economies with a P/E ratio of 22.01 NSE (India’s National Stock Exchange) is the third largest in the world in the number of trades after NYSE and NASDAQ

30. Indian Economy and Capital Market at a Glance India has 23 small and 2 big stock exchanges The 2 big stock exchanges (National Stock Exchange and Bombay Stock Exchange) account for 90 per cent of trade Over 7000 listed companies on the stock exchanges – largest in the world

31. Indian Economy and Capital Market at a Glance 9040 brokers in cash segment and 1064 in derivative segment of the market 122 investment bankers in the market 58 under writers to support primary issues 40 foreign venture capital funds 120 Portfolio managers

32. Indian Economy and Capital Market at a Glance 11 custodian banks 2 depositories with over 9 million beneficiary owner accounts 120 Portfolio managers Number of traders at 20 million Number of internet trading clients at 1.44 million Internet trading at 12 per cent of total trading

33. Indian Economy and Capital Market at a Glance Rise in index during the last TWELEVE months over 100 per cent Year on year return during the last year at 74 per cent Daily volatility of the market 0.76 per cent to 1.29 per cent 39 mutual funds with over 700 schemes for investment

34. Indian Economy and Capital Market at a Glance Cumulative assets of mutual funds over US$68 billion India launches Capital Protection Fund and Gold Exchange Traded Funds About 1000 foreign institutional investors

35. Indian Economy and Capital Market at a Glance Investors by foreign institutional investors at over $50 billion At current prices, it is around 15 per cent of the total market capitalization Only broad based entities established and incorporated abroad are eligible to be registered as Foreign Institutional investors in India

36. Indian Economy and Capital Market at a Glance FIIs can invest on behalf of their clients through sub-accounts For normal FIIs, limit for investment in equity is at least 70 per cent while the rest could be invested in debt up to a maximum limit of 30 per cent

37. Indian Economy and Capital Market at a Glance FIIs could also be dedicated debt funds who can invest up to 100 per cent in debt FIIs can issue overseas derivative instruments like Participatory Notes (PNs) to the entities registered in the country of origin. There are 86 venture capital funds and 54 foreign venture capital investors Most Foreign venture capital funds provide seed capital to firms with enormous growth potential

38. Why invest in Indian capital markets? Business Week says that of 100 emerging market firms which are rapidly globalising 21 are Indian firms Economists project India to become the third largest economy in the world by 2040 Indian capital market regulator has acquired international credibility in the least possible time

39. Why invest in Indian capital markets? India has a disclosure based regime of regulation Disclosure and Investor Protection guidelines available India’s accounting standards are closer to international standards India has a well laid down legal framework

40. Why invest in Indian capital markets? India has T+2 rolling settlement as opposed to T+3 in NYSE. In India the transactions are totally electronic on a real time basis. India has several protective safeguards for the retail investor such as grading system of public offering, retail quota at 25 per cent etc.

41. Why invest in Indian capital markets? SEBI has made corporate governance guidelines mandatory for listed companies Mutual funds are permitted to invest overseas up to $3 billion Margin trading is in vogue Corporatisation and demutualization of stock exchanges on card - foreign participation in bourses permitted.

42. Why invest in Indian capital markets? As an integral part of risk management trading and exposure limits, var margins and mark to market margins are in vogue Clearing houses and corporations with novation in place Almost 100 per cent risk free electronic settlement through depository system SEBI has a surveillance and enforcement system in place

43. Why invest in Indian capital markets? India to become a regional hub for bond trading once a free financial zone is set up India to set up a world class National Institute for Securities Markets with 7 business schools under its fold

44. Corporate Hierarchy The trading member has the facility of defining a hierarchy amongst its users of the NEAT system. Corporate Manager BRANCH 1 BRANCH 2 DEALER 1 DEALER 2 DEALER 3DEALER 4

45. Corporate Hierarchy The users of the trading system can logon as either of the user types. Corporate Manger : is a user at the highest level in a trading firm Branch Manager : is the user placed under corporate Manager and powers are restricted to the branch level operations Dealer : is the lowest person in the hierarchy and he can performs action for himself only

46. Market Makers Dealers who are responsible for creating and maintaining market in a security market is called “ Market Makers” A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds

47. Market Phase Bull Phase Bear Phase Open Close

48. Bull An investor who thinks the market, a specific security or an industry will rise Bulls are optimistic investors who are presently predicting good things for the market, and are attempting to profit from this upward movement. For example if you are bullish on the S&P 500 you will attempt to profit from a rise in the index by going long on it.

49. Bear An investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market.

50. Open An unexecuted order that is still valid. The start of trading on a securities exchange Orders that are entered by investors but not yet transacted are deemed to be open until they expire or are filled.

51. Close The end of a trading session. The closing price is quoted in the newspaper

52. Jobbers & Brokers A Jobber is a dealer in securities A Broker is an agent of a buyer or seller of securities Remisiers are the sub-brokers or agents appointed by the brokers

53. Trading Mechanism It was open outcry Replaced with Screen Based Trading System (SBTS) Punching of orders through a remote computer Price Time priority Wireless application Protocol (WAP) helps in bringing equal access to all the investors across the country The data is transmitted through VSAT / Leased Line / Modem It is transparent, objective and fair Complete Market Information On-line

54. Trading Basket Trading Index Trading Buyback Trading

55. Index Trading The purpose of Index Trading is to provide a facility to NEAT user with a facility of buying and selling of Indices, in terms of securities that comprises of Index Currently it available only for NIFTY securities The index trade provides user with the choice of gaining with the rise / decline of the index values either by buying / selling

56. Internet Broking SEBI committee has approved the use of Internet as on Order Routing System (ORS) It is used as a communicating system between a client and broker On receiving the order the broker verify the authenticity of the order It routes the order to the appropriate exchange on verification The client will have the control on the quotes and information On execution of the order it is confirmed to the client on real time basis